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Children's Place to exit Disney business in North America
27
Mar '08
The Children's Place Retail Stores Inc provided an update on its plans to exit the Disney Store North America (DSNA) business in order to focus on its core namesake brand. The Company conducts the DSNA business through its subsidiary Hoop Holdings LLC and its subsidiaries (Hoop) under a license agreement with The Walt Disney Company.

As previously announced on March 20, 2008, The Children's Place Retail Stores Inc decided to exit the DSNA business as part of the Company's review of strategic alternatives. As part of the review, the current management team determined that the license agreement, originated in 2004, requires substantial investments that are not expected to deliver economic returns.

The Company also took into account the losses incurred by DSNA's operations, DSNA's current earnings prospects as a licensee, and the restrictions imposed by the license agreement on the sale of the business to a party other than The Walt Disney Company. It was therefore concluded that the Company will be in a better position to maximize value by focusing on its namesake Children's Place brand.

Importantly, this action is only one component of a broader strategy to maximize shareholder value. As announced last week, the management team is undertaking a number of initiatives to reduce expenses, streamline operations, and lower inventories and capital expenditures.

Also, as previously announced, the Company and Hoop have been engaged in advanced negotiations concerning the transfer of a substantial portion of the DSNA business to The Walt Disney Company. In connection with these negotiations, Hoop's Board of Directors has determined that with limited strategic and financial options available under the license agreement, Hoop's only alternative was to file bankruptcy proceedings.

In a separate press release, Hoop announced that it commenced a Chapter 11 case for the reasons described above. It also intends to pursue the transfer of a substantial portion of the DSNA business to an affiliate of The Walt Disney Company in order to maximize proceeds available to its stakeholders. By filing such a case, Hoop also expects to complete an orderly wind-down of the rest of its affairs.

The transaction under negotiation is subject to the satisfaction of certain conditions, including approval of the U.S. Bankruptcy Court and is targeted for completion by April 30, 2008. In the event that the transaction as agreed to by the parties is approved by the Court, the Company would be released from any liabilities and all claims that have been or might be asserted by The Walt Disney Company.


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